February Market Commentary

The first month of 2018 was a good one for the major stock markets which we cover in this Bulletin. We report on 12 markets and 11 of them made gains in January – in some cases, spectacular gains, which many investors would regard as more than adequate for a full year. But sitting alone on the naughty step was the UK: as we shall see below there was plenty of good news for the UK in the month but, dogged by uncertainties over Brexit, continuing doubts about Theresa May and the collapse of Carillion, the FTSE fell 2% in the month.

Why did global stock markets do so well? As we will see below, there was good news from China and, in addition, the World Bank issued a bullish forecast as it looked ahead to 2018. Reporting that global economic growth had been stronger than expected in 2017, the Bank forecast growth of 3.1% for the coming year. The Bank’s president, Jim Yong Kim said, “The broad-based recovery in global growth is encouraging”.

Add in the continued expansion in China, low interest rates and easy monetary policy around the world and it is no wonder that stock markets are doing well.

There was certainly plenty of self-congratulation at the World Economic Forum, the annual meeting of business and political leaders in the Swiss resort of Davos. Donald Trump flew in by helicopter – the first US President to attend since Bill Clinton in 2000 – and made a tub-thumping speech highlighting American growth and making no apologies for acting as his country’s “cheerleader.”

Theresa May made a somewhat lacklustre speech – which prompted both the Times and the Telegraph to question her continued leadership – and John McDonnell was also in attendance. The UK’s Shadow Chancellor railed against the evils of capitalism whilst staying in an €800 per night hotel.

UK
The big business story in the UK in the first month of the year was the collapse of the government’s ‘go-to’ contractor Carillion. The company went under with debts of £1.5bn, including a hole in the pension fund of at least £600m as Government ministers continued to dole out contracts even after three profit warnings. Up to 30,000 small businesses are owed money by Carillion and the receivers have told them to expect less than 1p in the pound on the money owed. There are bound to be redundancies and companies going out of business: equally worrying is the total lack of business acumen shown by Her Majesty’s Government.

Despite this, there was plenty of good news around in January. The month started with all the retailers reporting on their Christmas trading figures: Next, Aldi and Lidl did well but Debenhams reported disappointing figures and – having feasted on Carillion – the vultures are now circling the high street chain.

UK manufacturing, though, was at its highest for ten years and growth for the final quarter of 2017 was revised upwards to 0.5%. Ford picked the UK to build its new diesel engines, and there was also a welcome boost for the Chancellor. Both Philip Hammond and George Osborne before him have bemoaned the UK’s productivity, but figures from the Office for National Statistics showed that UK productivity had enjoyed its biggest increase since 2011, up by 0.9% in the third quarter of 2017.

Inflation also dipped slightly to 3%, but if you are looking for clouds on the horizon then the oil price hit a four year high of $70 a barrel – so petrol will not be coming down in price any time soon – and mortgage approvals slipped to their lowest level for five years.

…And inevitably, there was further bad news for the retail sector. We have already mentioned Debenhams and – once they had digested the Christmas trading figures – Marks & Spencer announced the closure of 14 stores. At the same time Sainsbury’s and Tesco were warning of job cuts: as we comment below, retail is changing inexorably and it will not result in more jobs.

This sombre mood was reflected on the stock market, with the FTSE 100 index of leading shares falling from December’s high and dropping 2% in January to 7,534. It was, however, a good month for the pound which strengthened appreciably against the dollar, rising by 5% to $1.4171.

Brexit
It is difficult to know where to start on Brexit. At the end of last year progress appeared to have been made with agreement reached over the UK’s ‘divorce bill.’ Attention has now shifted to the transition arrangements after the UK leaves, but whether that will be one year, two years or five years is anyone’s guess. Conservative MPs are once again at each other’s throats after Chancellor Philip Hammond made a speech in Davos saying he wanted only “very modest” changes to the status quo after Brexit – the so called BINO option (Brexit in Name Only).

US Treasury Secretary Steve Mnuchin has spoken of a ‘special’ free trade deal with the UK after Brexit, while International Trade Secretary Liam Fox has talked of up to 40 trade deals being in place by March 2019. Meanwhile, Theresa May has visited China, making trade deals but seemingly intimating that continuing membership of the EU customs union would still be a possibility.

With 14 months to go until the UK is supposed to leave the EU, many commentators are now making the point that the UK cannot go on trying to be ‘all things to all men’. Sooner or later it must declare a preferred position, as business increasingly calls for clarity.

Europe
Europe came back from its Christmas holidays to find Germany still without a government – although it appears that Angela Merkel is gradually drawing closer to a deal with the Social Democrats, which will allow her to remain as German Chancellor and de facto leader of Europe. With or without a government, the German economy ploughed on remorselessly, with the figures released for November confirming a trade surplus for the month of €23.7bn (£20.7bn).

However, it appears that Europe could be set for more problems, with the re-election of the anti-mass immigration, Eurosceptic Milos Zeman, to the Czech presidency, raising the prospect of a referendum on the country’s continued membership of the EU. Commentators will presumably have a hard time deciding between ‘Czechxit’ and ‘Czech out…’

But there is a solid block of countries in Central Europe – the Czech Republic, Hungary, Poland and Slovakia – who all appear to feel the same way. It may be that 2018 will present Angela Merkel with far greater problems than simply forming a coalition.

For now though, there seems to be little to worry about on Europe’s stock markets. The German DAX index rose by 2% in January, ending the month at 13,195. The French index did slightly better, rising by 3% to 5,482. But it was our old friend Greece that stole the show: with the country having survived for another year, the Athens stock market celebrated by rising 10% in January to reach 879.

US
It was a happy new year in the US as the Dow Jones index went through the 25,000 barrier in the first week of the year, despite figures showing that the US boom in job creation had run out of steam in December. ‘Non-farm payroll’, as it is known, added only 148,000 jobs in the month, largely due to job losses in the retail sector. Despite this, the US unemployment rate held steady at 4.1%, the lowest it has been since the year 2000.

The good news/bad news scenario in the US was neatly captured by retail giant Walmart, which announced that it would start paying its US staff at least $11 (£7.70) an hour, thanks to the US tax overhaul which has seen corporation tax fall to a flat rate of 21%. But then in the next breath it announced the closure of 63 of its 600 Sam’s Club stores and redundancies for thousands of workers. Amazon’s opening of the first ‘Amazon Go’ supermarket in Seattle only added to the perception that retail is changing rapidly and irreversibly, and there will be far more job losses to come.

There was equal confusion in Washington as the US Government ran out of money for a few days, with Congress failing to agree on the bill to fund the federal government until 16th February. This impasse is now a regular occurrence in the US, with the last government shutdown happening in 2013 and lasting for 16 days.

The month ended with a bullish President back from Davos and delivering his first State of the Union address. Whatever you think of Donald Trump, in the first year of his Presidency the US economy has grown, unemployment has fallen and the stock market has had a record run. The Dow Jones index eventually closed January at 26,149 – 6% up on the 24,719 at which it finished 2017.

Far East
There is one key question in the Far East and – despite South Korea seizing a second ship suspected of supplying oil to the North – it is not ‘has North Korea just launched another rocket?’

The question is simple: can China continue its remarkable growth rate and continue to be the economic powerhouse of the region? Figures for 2017 confirmed that the Chinese economy had grown by 6.9% – the first time in seven years that the pace of growth had picked up and ahead of the official target of 6.5%. Those who say, ‘yes, the growth can continue’ point to the fact that China only really became a key global economic power 15 years ago, to the ever-expanding middle class with ever-expanding consumer needs, and to initiatives like the One Belt, One Road project.

Those who say it must all end in tears argue that the growth is not real – several provincial governments have already admitted to faking figures to meet targets. They also argue that growth must slow down as China’s economy matures, and that it cannot be based on the current high levels of debt for ever. You pays your money and you takes your choice…

Away from China, South Korea’s Samsung – the world’s biggest memory chip maker – forecast record profits for the year of £10.4bn, although these were slightly below analysts’ expectations. Staying in South Korea, the government made trading in the crypto-currency Bitcoin illegal, amid fears it was increasingly being used by organised crime.

All four major Far Eastern stock markets were up during the first month of the year, with the Hong Kong market powering through the 30,000 barrier to close at 32,887 for a gain of 10% in the month. South Korea was up 4% to 2,566 and China up 5% to 3,481. Puffing along behind came the Japanese index, struggling up by just 1% to close January at 23,098.

Emerging Markets
For Emerging Markets, January’s big story was Canada’s decision to join the Trans-Pacific Partnership (TPP) which Donald Trump so spectacularly pulled out of last year. Canada had initially been reluctant to sign up because of concerns about the environment and labour protection, but will now join 10 other countries in Chile in March to sign the agreement. The TPP has been championed by Japan, which sees it as a way to counter China’s economic dominance in the region: Economy Minister Toshimitsu Motegi said the agreement would be an “engine to overcome protectionism”.

January was an excellent month for the three major stock markets we cover in this section. The Indian stock market rose 6% to finish the month at 35,965: Russia was up 9% to 2,290 and the Brazilian index shot up by 11% in January to close at 84,913.

And finally…
Football fans will know that January is the mid-season month when the ‘transfer window’ is open and Premiership leaders Manchester City continued their spending spree as they casually handed Athletic Bilbao £57m for defender Aymeric Laporte. Incredibly, this takes City’s spending on their defence since last summer to just under £150m – which is bigger than the more conventional defence budget of 52 countries.

Bottom of the list for defence spending are the Cape Verde Islands, who spend just $10m (£7.1m) last year. But City also outspent countries like Guatemala, Ghana and Afghanistan. Who said there was too much money in football?

No doubt Mr Laporte is well worth the £57m, but the real hero of January was Devon butcher Chris McCabe.

2017 was a fine year for the ‘And finally’ section of the Bulletin. 2018 will have to work hard to beat it – but Devon butcher Mr McCabe got the year off to the best possible start. The unlucky Mr McCabe found himself trapped in his own walk-in freezer after the door blew shut behind him. With the temperature as low as -20C, our hero feared the worst: he needed something to hammer the door release button, which (not surprisingly) had frozen shut. What could he do? The beef was too slippery and the lamb was too big. Fortunately, the shop had one giant black pudding left in the freezer – which saved Mr McCabe’s life. “I used it like a police battering ram,” he said. “I owe my life to a black pudding.”

Sadly, there are no reports of who subsequently bought the delicacy…

Time in the market, not timing the markets

With markets around the world continuing to prove unpredictable as momentous financial and political events continue to unfold, it’s perhaps not a surprise that investors are increasingly concerned about when the ‘best time’ for them to invest might be. Many of these people will decide to hold off on making an investment, choosing to keep their money out of the markets in order to see what happens.

This might seem sensible, but if you find yourself in this position it’s worth taking time to really consider your best option. The first thing to do is to remind yourself why you’re investing in the first place. Any investment should be made with the goal of achieving something you want, such as providing for your retirement; however, it’s important to remember that returns don’t run like clockwork.

Predicting short-term stock market movements is incredibly difficult, if not impossible. If it wasn’t, then every investor would be doing it and making their fortune easily. In order to counter any short-term shocks, one option is to make scheduled, monthly contributions to your investments if you’re using current income. This can position you over the long term whilst also helping to develop financial discipline. Those looking to invest a lump sum can also use this technique, splitting it into several tranches and investing over a longer period of time to reduce exposure to short-term risks.

Other ways to help maximise your results include investing as soon as you can in order to benefit from compounding, using tax allowances such as ISAs to reduce the impact of tax on your returns, and reviewing your annual saving total and increasing it when you can. Staying disciplined in your investments is key, as missing just a handful of the best days on the market can have a major impact.

2018 has been a good year for investors so far, but it’s important to keep in mind that this could change just as easily as it could continue. Many financial experts forecasted 2017 to be a worse year than it actually was, but that doesn’t mean these predictions can be forgotten just because the calendar has changed. Many are still expecting a market correction in the near future and with Brexit now just over a year away, it’s more likely to be a question of ‘when’ not ‘if’.

Enjoy the good times, but don’t focus on trying to predict exactly when things are going to change. If you’re planning to invest throughout your life, you can be certain that some years will be bad. Remember: long-term investors who keep to their plans are, more often than not, those who reap the greatest rewards.

Trips promising an experience for 2018

‘We are living in a material world, and I am a material girl’. So sang Madonna in her famous pop ode to owning things in 1984. But just as Madge’s song is now well over thirty years old (yes, really), so is the sentiment that you need to fill your life with stuff in order to enjoy the money you earn. Whilst allowing yourself some creature comforts and the occasional material expense is important, nowadays spending your money on experiences rather than things is considered by many to be a far better investment. With that in mind, here are a few suggestions for where you might head in 2018 to live this year in an ‘experiential world’.

Mongolia – If you’ve done one too many commercial festivals which could easily be transposed from one location to another, Mongolia’s Eagle Festival could be the remedy you’ve been looking for. Keeping its roots in the nomadic ‘ger’ camps situated high up the Altai Mountains, the festival celebrates traditional eagle hunting that is still part of the everyday lives of the people who call this magnificent landscape home. Other experiences to take in include tracking wild horses with the Gobi locals, hiking Bayanzag’s ‘Flaming Cliffs’ and exploring the ruins of monasteries destroyed by Stalin.

Iceland – Few other destinations offer the chance to see both the Northern Lights and whales in their natural habitat. On top of this, you’ll get to see the glaciers, lava fields and wild waterfalls that make up Iceland’s natural landscape. There are cruise packages which offer all of this as one week-long excursion, providing you with seven days of natural wonder that you won’t forget.

India – Sadly, a destination that’s perhaps become a bit clichéd, thanks to the gap year crowd wanting to ‘find themselves’ before heading off to university, but India has so much more to offer. The country has countless communities still ‘off grid’, such as the Konyak tribe of Nagaland, where you’ll be able to immerse yourself in their ancient rituals and headhunting history through their Aoling Festival. There’s also a chance to see the ancient temples which pepper the landscape and even see a nearby World War II battleground.

The Netherlands – If you’re after an experience slightly closer to home, you could do a lot worse than heading to Leeuwarden, the capital city of Friesland in the Netherlands and the European Capital of Culture in 2018. You can explore the seventeenth century streets and canalways on foot or by bicycle, with the chance to learn about famous Leeuwarder and World War I spy Mata Hari.

What is the pensions advice exemption?

In general, pensions information and advice which employers provide to their employees – such as presentations which employees are invited to attend – are unlikely to result in a tax charge on an employee benefit. However, if an external provider has been paid by the employer to give their employees advice, this will usually result in a tax charge on the cost of the advice, as it represents an employee-related benefit.

As such, from 6th April last year, a statutory exemption was introduced by the government. Under the exemption, the cost of pensions advice up to £500 is exempt from Income Tax every tax year. This applies whether the employer provides the advice to its employees directly, or whether they pay or reimburse the cost of external pensions advice incurred by employees. If the cost of giving the advice exceeds £500 per employee, then the first £500 of the total amount is exempt from tax.

The exemption is applicable for current, former and prospective employees and applies to information or advice provided in relation to an employee’s pension arrangements or the use of their pension funds. This can include advice on general financial and tax issues linked to pension arrangements or fund, which allow the employee to make informed decisions about their retirement savings. If a person has more than one employer, and each employer provides their own pensions advice in the same tax year, the exemption applies separately to each employment.

There are two conditions which apply to the exemption. The first relates to availability and states that the pensions advice, reimbursement or payment needs to be provided through a scheme which is either open to all of an employer’s employees, or to all employees of the employer based at a specific location.

The second condition concerns age and ill health. This condition states that the advice, reimbursement or payment is provided to all employees (or all those at a specific location) who have reached the ‘minimum qualifying age’ to opt in to the employer’s registered pension scheme. The ‘minimum qualifying age’ means the relevant pension age of the employee, minus five years, so that employers are able to provide advice to employees nearing retirement. From April 2010, the normal minimum pension age has been 55, so for employers where this is the case, the minimum qualifying age would be 50.

The advice, reimbursement or payment should also be provided to all employees (or, again, all those at a specific location) who meet the ill-health condition. This means the employer can provide advice to employees preparing to retire on grounds of ill-health, as long as all employees in the same situation also have the advice made available to them. An employee meets the ‘ill-health condition’ if their employer agrees that they are – and will continue to be – incapable of carrying out their job due to physical or mental impairment, based on evidence offered by a registered medical practitioner.

January Market Commentary

Another year seems to have flown by in the space of about five months. December, in particular, seemed to go past in a blur.

It was, however, the month when some progress was – finally – made in the Brexit negotiations. It was also the month when Scotland used its tax-raising powers to increase income tax, when Germany worried about Chinese spies using fake LinkedIn profiles and when yet more sanctions were heaped on the North Korean regime – which were predictably condemned as an ‘act of war’.

Half of the major stock markets we cover in this commentary rose in the month and overall 2017 was a good year for world markets: the Hong Kong market led the way with a rise of 36% and only the Russian index fell significantly during the year.

UK
The month didn’t get off to the best of starts in the UK as once again UK retail was facing problems. RBS announced that it would close one in four of its branches – totalling 259 and inevitably having an effect on the national high street – and Toys R Us narrowly avoided having to close its UK branches as it reached an 11th hour agreement with creditors and the Pension Protection Fund.

There was, however, plenty of good news for the UK in December, although wages continue to lag behind inflation, a situation which looks set to continue throughout 2018.

UK factory activity grew at its fastest pace for more than four years in November, with the Purchasing Managers’ Index hitting 58.2 – its best level for 51 months. Separate official data for 2016 showed that inward investment into the UK had also hit a record £145.6bn, although this was boosted by some large takeover deals. UK manufacturing also expanded for the sixth month in a row, helped by record car production.

Unemployment was down again, falling by 26,000 to 1.43m, with the jobless rate remaining unchanged at 4.3%. In addition, the UK economy was shown to have grown at a faster rate than had previously been thought. Revised figures from the Office for National Statistics showed that the economy had grown by 1.7% in the third quarter, compared to the original estimate of 1.5%.

To cap a good month for those whose glass is half full, the UK was named the best place in the world for business by the US media group Forbes. In the annual ranking the UK leapt from fifth to first, scoring especially well on technological readiness and the education of its workforce.

How did all this translate onto the stock market? The FTSE-100 index of leading shares started the year at 7,143 and ended it up 8% at a new record high of 7,688. The market was up 5% in December, fuelled by the now-traditional ‘Santa rally.’ The pound also enjoyed a good year: it was largely unchanged against the dollar in December but rose 9% over the course of the year to $1.3504.

Brexit
As we noted in the introduction, December was the month when some progress finally appeared to have been made on the Brexit negotiations as the UK’s ‘divorce bill’ seemed to have been agreed. You don’t have to look far to find a high ranking official (on both sides) who will ominously mutter, ‘Nothing is agreed until everything is agreed,’ but – to use Churchill’s phrase – while this may not be the beginning of the end, it may just be the end of the beginning.

By the end of this year the UK will – in theory – be just 88 days away from leaving the EU. But over the course of the next 12 months there will unquestionably be plenty of twists, turns and bumps in the road for this section of the commentary to report on.

Europe
As we mentioned in the introduction, December was the month when Germany voiced its concerns over possible Chinese spying using the social/business network LinkedIn. The German intelligence agency BfV is worried about the Chinese using fake profiles to target up to 10,000 German politicians, business leaders and officials. China – which has denied similar accusations in the past – did not respond to the German allegations.

But there was better news of other EU/Far East relationships as a trade deal was tied up between the EU and Japan which will – subject to ratification by EU members – create the world’s largest open economic area. The agreement is seen as a challenge to the protectionism of Donald Trump, with a joint statement saying that the EU and Japan are “committed to keeping the world economy working on the basis of free, open and fair markets … fighting the temptation of protectionism”.

…And in a bid to track down those people who have been protecting their money from the taxman, the EU published its first blacklist of tax havens, naming 17 territories including St. Lucia, Barbados and South Korea.

What of European stock markets in December and 2017 as a whole? Both the German and French indices drifted down 1% in the month, but overall they enjoyed a good year. The German DAX index was up 13% in 2017 to end the year at 12,918 while the French stock market rose 9% to 5,313. An honourable mention also goes to Greece: the debt-ridden country staggered through another year and the Athens stock market duly rose 25% in 2017 to close at 802.

US
There were two major pieces of news in the United States, with the Federal Reserve once again raising interest rates and a programme of major tax cuts being passed by Congress.

The Fed raised rates by a further 0.25% – the third rise in 2017 – as it projected growth of 2.5% for 2017 and 2018, expecting the US economy to be stimulated by the President’s tax cuts. At the moment the Fed is targeting a range of 1.25% to 1.5% for US interest rates, but further rises are expected next year, with most forecasters expecting a base rate of around 2%.

The tax cuts – agreed by both houses of Congress – have been described as the biggest overhaul of the US tax system for 30 years, with corporation tax falling from 35% to 21% and the highest rate of individual income tax coming down from 39.6% to 37%. Democrats have argued that the cuts will only favour the rich, while the Joint Committee on Taxation has suggested they will add $1.4tn to the $20tn US national debt over the next 10 years. But right now what the President wants the President gets, and he wanted swingeing tax cuts…

There was also good news for the US economy, with the November jobs figures showing 228,000 jobs created against expectations of 200,000. The unemployment rate held steady at 4.1% as firms appeared to hire seasonal workers earlier than usual.

On Wall Street, 2017 was a good year for the Dow Jones index. Having started the year at 19,763, it finished up 25% at 24,719 having risen 2% in December.

Far East
For once, the month in the Far East wasn’t dominated by stories of North Korean rockets. That is not to say that tension in the area will disappear in 2018: North Korea may be sending a team to the Winter Olympics in South Korea, but in his Christmas message Kim Jong-un stressed the fact that the nuclear button “is always on my desk”.

In China, there was a small rise in bank base rates following the rise in the US, but for once it was Japan that was really making the news in the region. The country is enjoying its longest period of sustained economic growth since 1994 – admittedly, thanks to four years of economic stimulus from Prime Minister Shinzo Abe – and growth for the three months to September was revised upwards to 2.5%, well ahead of initial estimates of 1.4%.

In another sign of what we can look forward to in the near future, Nissan announced that it would start trialling driverless taxis from March next year. The plan is that passengers will be able to summon the cars using an app, with free trials due to take place in Yokohama.

There was more turbulence for crypto-currency Bitcoin as the South Korean authorities – worried about Bitcoin being used for money laundering – announced a crackdown on anonymous trading accounts and said they would close exchanges if necessary.

On exchanges that were very much open, 2017 was an excellent year for all the major Far Eastern stock markets. China was virtually unchanged in December but ended the year up 7% at 3,307. Similarly both the Japanese and South Korean markets were quiet in December, but closed 2017 up 19% and 22% respectively, with the Japanese Nikkei Dow closing at 22,765 and the South Korean market at 2,467. Pride of place though, went to Hong Kong, the best performing market of those we cover in this commentary. The stock market there rose 3% in December to end the month at 29,919 – up 36% for the year as a whole.

Emerging Markets
As we have already seen, December was a volatile month for Bitcoin, but this didn’t stop crisis-hit Venezuela from grasping at a virtual straw as President Nicolas Maduro announced the creation of a new currency in a bid to ease the country’s economic crisis. A new virtual currency – the Petro – will apparently be backed by Venezuela’s oil, gas and diamond reserves. Opposition leaders poured scorn on the plan, pointing out that the President had already mortgaged the reserves several times over. It seems a fairly safe prediction that the country with the largest oil reserves in the world will continue to lurch from crisis to crisis in the coming year.

A country emphatically not lurching from crisis to crisis is India, with forecasts suggesting that it will overtake the UK and France to become the 5th largest economy in the world in 2018. According to World Bank data for 2016 India’s GDP, at $2.26tn (£1.69tn) was the 7th largest in dollar terms: the forecasts are that 2018 will see it overtake the UK (with GDP of $2.65tn) and France ($2.47tn).

This was reflected on the Indian stock market, up 3% in December (and 28% for the year as a whole) to finish 2017 at 34,057. The Brazilian market also enjoyed an excellent year, rising by 27%: in December it rose 6% to close the month at 76,402. The Russian market was virtually unchanged in December and ended the month at 2,109: this meant that it fell by 6% for 2017 as a whole, with the damage really being done in the first six months of the year.

And finally
2017 was, by any standards, a vintage year for the ‘And Finally’ section of this commentary. In March, we had the ‘Temple of Heaven’ – the public park in Beijing which installed facial recognition software to dispense loo roll because visitors were taking it home with them.

July brought us the Texan maintenance engineer, who on a bright and sunny day set out to change the lock on a Bank of America ATM. Unfortunately, while performing this routine task our hero (understandably he preferred not to be named) trapped himself inside the ATM. He was only rescued when a customer tried to withdraw $100 and instead received a note saying, ‘Please help, I’m stuck in here.’ The customer naturally thought it was a joke, but on failing to spot any TV cameras and hearing a faint voice coming from the hole in the wall, decided to call the police…

So what of December? The month did not let us down…

Counterfeit goods now account for perhaps 4% of the world economy. So there was good news at the beginning of the month for HM Border Force and the Intellectual Property Office as they seized 82,320 pairs of fake Calvin Klein underpants worth a reputed £1.5m.

Along with the fake boxers, they also grabbed Gillette Mach 3 razor blades, Nike Vapormax trainers and 379 Barcelona and Borussia Dortmund football shirts. If that sounds suspiciously like your Christmas presents you may want to have a word with your relatives.

There was also good and bad news for the Royal Navy in December as it took delivery of its new £3.1bn aircraft carrier ‘HMS Queen Elizabeth.’ But the bad news was that she (the boat, not Her Majesty) was leaking and taking in the small matter of 200 litres of sea water every hour. BBC Defence Correspondent Jonathan Beale said the leak was “highly embarrassing” for the Royal Navy, but dismissed rumours that the aircraft carrier would be renamed Leaky McLeakface…

One for the kids? – If they’re saving for a home, check they’re making the most of the Lifetime ISA

If you’re saving for a home through a Help To Buy ISA or know someone who is, it’s worth being aware of a planning opportunity which could boost your savings by an additional £1,100. But anyone hoping to take advantage of this opportunity needs to be quick, as it will only be available for just under four months more.

Any savings in a Help To Buy ISA which are transferred to the new Lifetime ISA before 5th April 2018 will benefit from a top up of 25% from the government. The opportunity has arisen thanks to the Help To Buy ISA small print relating to the transfer of money saved before the launch of the Lifetime ISA on 6th April 2017.

Lifetime ISAs have an annual limit of £4,000, which includes money transferred from another savings account. However, money transferred from a Help To Buy ISA within the first twelve months of Lifetime ISAs becoming available does not count towards the contribution limit for the 2017-2018 tax year. As such, any money transferred into the Lifetime ISA from the Help To Buy ISA will be boosted by the government top-up, potentially resulting in hundreds of pounds being added to your savings.

For example, someone who had saved the £4,400 maximum amount into a Help To Buy ISA before April 2017 could transfer this into a Lifetime ISA before 5th April 2018. As this wouldn’t contribute to their limit, they could then save a further £4,000 into the Lifetime ISA for a total of £8,400. The 25% bonus would then be added to the entire £8,400 in April next year, giving an additional £2,100. In any other year, the maximum top-up which could be earned from the Lifetime ISA would be £1,000.

So If you know anyone using a Help To Buy ISA to save towards a first home, transferring money to a Lifetime ISA to enjoy an additional top-up of up to £1,100 in April next year could make collecting the keys to their own place happen a little bit sooner.

What makes a resolution easier to keep?

The start of a new year brings with it many things, not least the tradition of setting resolutions in order to start the next twelve months off as you mean to go on. But as many people who’ve made new year’s resolutions will know, the intention of resolving to do or not do something is quite different to actually following through and making it a reality – and that’s true no matter what time of year you do it.

So, what can you do to make it more likely that you’ll reach the goals you’ve set yourself? Research suggests that the best way to ensure you keep to your resolutions is to frame them as ‘loss aversion’. That means thinking about your desired end as recovering something that you’ve lost, rather than gaining something new. For example, rather than making a resolution to gain a new ability, it might be better to focus on picking up an old hobby and getting back to the same level you were at in the past.

Another key motivator can be involving other people, as if something you’ve said you will do is important to someone else, research suggests that you’re more likely to actually do it. Committing to learning a new language can easily fall by the wayside if it’s only you who’s involved, but if you commit to learning with a friend, you’ll have the added motivation of not wanting to let them down or hinder their own progress.

Financial and reputational motivators can also be powerful. If you’ve already paid in advance for a month’s worth of evening classes, you’re more likely to keep up your attendance in order to not waste your money. Similarly, if you actively tell friends and family what your resolution is, you’ll have the added motivation to keep up what you’ve said you’ll do in order to not seem unreliable. Detail is also important: don’t simply say that you’ll “get more exercise”, say which days you plan to get active and for how long, that way you can measure how successful you’ve been.

Keeping your resolutions for more than a few well-intentioned weeks and making them part of your routine requires long-term planning. If you want to save up for something specific, setting yourself the goal of travelling the world before you turn 50 can help ensure you stick to your intentions in the months and years ahead. As with anything in life, making your resolutions a success requires hard work and commitment from you – but if they’ll get you what you truly want, it’ll be worth it in the end.

How to avoid the mid-life savings crisis

Recent research has revealed that almost one in five people (18%) in their 50s and 60s are failing to save anything towards their retirement thanks to the rising cost of living and stalling wage growth. Described as a ‘mid-life savings crisis’, it means that millions of people close to retirement age are unaware of how much they will need to pay into their pension pot in order to live comfortably once they finish working.

More than half of people in their 60s have not increased the payments they make into their pension in the final years before retirement, a figure which increases to 64% when looking at people in their 50s. Inflation in the UK has reached its highest rate in nearly six years at 3.1%, whilst the average weekly pay packet is growing at only 2.2%, making it increasingly more difficult to cover household costs and put money away for the future.

As a result of the added squeeze on their finances, one in four people said that since reaching their 50s they have been choosing to spend less money in order to put more away for when they retire. Around one in six of these people do this due to moving from full-time to part-time work or reducing their contractual hours, which has resulted in their income being reduced. One in ten people also said that they now spend more money than they did before turning 50, explaining that they like to splash out on family members including children, grandchildren and elderly parents.

For anyone over 50 finding themselves in a mid-life savings crisis, the first step is not to resign yourself to thinking that it’s too late to do anything about it. Whilst you don’t have the opportunity to grow your savings in the same way as someone at the start of their working life, starting to put money away each month, as soon as possible, is essential. Making the most of your employer’s additional contributions will also help. As employers will often match whatever you put in, contributing more of your monthly salary will mean your employer will pay in more too.

If you’re a homeowner over 50, another option to increase your pension pot is releasing some of the equity in your property through downsizing. Whilst it might be an emotionally difficult decision to move from your family home, it can be something worth exploring to provide a healthy boost to your retirement savings and ensure you can comfortably enjoy your life after work.

December Market Commentary

November was a relatively disappointing month for world stock markets, with the majority of the markets we cover in this commentary losing ground in the month: however, the largest fall was just 3% so there were no real disasters. Pride of place went to the Dow Jones index in the US, which was up by 4% in the month as the President toured the Far East, intent on doing ever more trade deals.

The big event in the UK was Philip Hammond’s first Autumn Budget, but of rather more long-term significance might have been the launch of yet another missile by North Korea. The government in Pyongyang said that the ICBM brought “the whole of the USA” within range: back from the Far East, Donald Trump said that he “would take care of it”. The rest of the world watched on and worried…

UK
As above, 22nd November brought us the Chancellor’s Autumn Budget as he pledged to “grasp the opportunities of Brexit” and build an economy “fit for the future”. In truth, there were no major announcements except the abolition of stamp duty for the majority of first-time buyers. You are never going to get a dramatic speech from Philip Hammond, but he sat down after an hour with his job far more secure than when he had started speaking.

If you were looking for bad news in the speech you could certainly find it in the downgrading of UK growth forecasts, with the Office for Budget Responsibility sharply cutting back its forecast. This was despite all three sectors of the economy – manufacturing, construction and the service sector – all reporting strong growth in October.

Another feature of the Chancellor’s speech had been the continuing emphasis on the UK’s poor productivity, and during the month the CBI produced a report suggesting that ‘embracing everyday tech’ could boost the UK economy by £100bn. With management consultants McKinsey publishing a report suggesting that robots and artificial intelligence could take 800m jobs worldwide by 2030, some UK firms may need to ‘embrace everyday tech’ rather quickly.

As ever, there was the usual mixture of good news and bad news for the economy. The UK’s trade gap – the difference between what we import and what we export – widened to £9.5bn, and the number of people in work declined slightly to 32m. However, unemployment fell by another 59,000 to 1.42m to leave the unemployment rate at 4.3%, the lowest since 1975.

UK inflation stayed unchanged at 3%. The Bank of England said it was likely to remain at that level (and hence above the level of pay rises) but in his Budget speech the Chancellor said it “would quickly decline”. You pays your money…

Despite touching a new record high of 7,560 at the beginning of November, the FTSE-100 index of leading shares ended the month down 2% at 7,327. With a month to go, this has been a lacklustre year for the UK stock market, with the FTSE up by just 3% since the beginning of the year. There was better news for the pound, which rose by 2% against the dollar to close November at $1.3486.

Brexit
So, do we have a deal? After another month of wrangling and press speculation, it appears that a deal may have been reached on the UK’s ‘divorce settlement’ with the EU. Depending on which paper you read, the figure is anywhere between €40bn and €60bn but the consensus seems to be somewhere in the middle. The BBC reported that it ‘understands’ a figure of €50bn (£44bn) has been agreed on, as Theresa May finally managed to secure the agreement of dissenters in the Cabinet. Whether a more-sceptical public can quickly be brought onside remains to be seen.

In September, the Prime Minister had said that the UK was willing to pay around €20bn but that figure was always likely to be increased, and hopefully the European summit in December will now see serious talks start on the nature of Britain’s future trading relationship with the EU. But there’s ‘many a slip twixt cup and lip’ as your Grandma used to say, and with neither Theresa May nor Angela Merkel having a particularly strong grip on power, there is still plenty of potential for the negotiations to become re-negotiations.

Europe
The big story in Europe was political, not economic, as talks on forming a coalition government in Germany collapsed, leaving Angela Merkel facing her biggest challenge in 12 years as leader.

The free-market liberal FDP pulled out of the coalition talks after four weeks of negotiations with Merkel’s CDU/CSU bloc and the Green party. The FDP leader, Christian Linder, said that there was “no basis of trust” between them. With the German President saying that he will now hold talks with all parties, it is thought that Angela Merkel would prefer another election – in the hope of securing a working majority – to the prospect of leading a minority government. But with nothing having changed in Germany since the original poll in September, the danger must be that another election would lead to more gains for the right-wing Alternative fur Deutschland party, and an even more fragmented parliament.

And while the politicians failed to reach an agreement, the German stock market slid back, dropping by 2% in November to end the month at 13,024. The index in France – where new President, Emmanuel Macron, continues to see his approval ratings slide – was down by a similar amount, closing at 5,373.

US
We have covered the President’s trip to the Far East below, but before he went he confirmed the expected appointment of Jerome Powell as the next Chairman of the Federal Reserve Bank, replacing Janet Yellen. Analysts regard Powell as the status-quo candidate, someone who is likely to continue the current policy of gradually raising interest rates.

Meanwhile, Facebook was continuing its policy of not-so-gradually raising profits, as it brought in more than $10bn in advertising in the third quarter of the year, leading to profits of $4.7bn for the same period – up 80% on the same period for the previous year.

There was also good news for Apple as queues formed around the world for the latest iPhone X – just £999 to get an edge-to-edge screen if you are interested – and there are suggestions that if the phone is a success it could make Apple the world’s first trillion-dollar company.

But the news for the wider US economy was less good, with figures for October showing jobs growth had fallen short of the forecasts. Although the economy added 261,000 jobs in the month, economists had been predicting a higher figure after Hurricanes Irma and Harvey had depressed payroll growth in September. However, the number was enough to push the US unemployment rate down to 4.1% – the lowest figures since 2000.

On Wall Street it was another good month for the Dow Jones index, which was up 4% to 24,272. Whatever the rest of the world think, the US stock market certainly likes the President: it is now up by more than 20% for the year as a whole.

Far East
The good news for the Far East in November was that President Trump came to visit, spending 12 days in the region and apparently doing $300bn of trade deals, including the first major investment by a Chinese energy firm in the US.

Having accused China of pretty much everything except the assassination of JFK during the election campaign, the President struck a much more conciliatory tone on this trip, saying that he did not blame China for unfair trade with the US, and recognised that China had been “working hard” to benefit its people.

Meanwhile, the Chinese people had rather more pressing concerns – spending money online on Singles’ Day (roughly the Chinese equivalent of Black Friday and Cyber Monday). Showing the rest of the world how it should be done Alibaba – China’s answer to Amazon – recorded Singles’ Day sales of $25.4bn (just over £19bn) and clocked up its first $1bn within two minutes of Singles’ Day starting.

Across the China Sea, the Japanese economy was enjoying its longest growth streak since 2001, having now expanded for seven quarters in a row. The latest figures confirmed that gross domestic product had expanded by 1.4% for the quarter ending in September. This comes after four continuous years of economic stimulus from the government, with an increased demand for Japanese exports offsetting a slowdown in domestic demand.

On the Far Eastern stock markets, it was a case of ‘two up and two down’ in November. The Japanese Nikkei Dow index rose 3% to 22,725 and the Hong Kong index was up by a similar amount to 29,177 – although, at one point during the month it had broken through the 30,000 barrier for the first time since November 2007.

The Chinese and South Korean markets both went in the opposite direction, and both were down by 2% in the month, falling to 3,318 and 2,476 respectively.

Emerging Markets
November was a relatively quiet month for the major emerging markets, which we cover in this commentary. The Russian stock market fared best, rising 2% in the month to close at 2,101 whilst the Brazilian market dropped 3% to 71,971. Stuck in the middle was the Indian stock market, which fell by just 64 points to 33,149 – unchanged in percentage terms.

The real drama though, was happening in Venezuela, where the country with the largest proven oil reserves in the world finally ran out of money and defaulted on its sovereign debt. While a tragedy unfolded for the country’s citizens – with the socialist government advising them to eat their pet rabbits for food – a temporary deal was agreed with Russia, allowing Venezuela to re-structure $3.15bn of debt. But with the country owing an estimated $140bn to foreign creditors, the outlook for ordinary Venezuelan citizens looks unremittingly bleak.

And finally
Long-time readers of the ‘And finally’ section may remember one of our true heroes, Joaquin Garcia, the Spanish civil servant who failed to show up for work for six years without anyone at the Spanish water board noticing. Poor old Joaquin’s dereliction of duty was only discovered when he turned up to collect an award for ‘two decades of loyal and dedicated service’ and his boss realised that he hadn’t seen him for six years.

Joaquin – an engineer whose job was to supervise a waste water treatment plant – is now enjoying his retirement, but at last he has company on this section’s roll of honour.

Step forward Tom Colella, a 60 year old electrician in Perth, Australia, who was sacked after playing golf – instead of working – 140 times over the last two years. But all credit to Tom, who relied on a 180 year old scientific discovery for his jaunts to the golf course. A ‘Faraday cage’ – named after English scientist Michael Faraday – dates back to 1836 and is a device that can block electromagnetic fields.

Tom set up a Faraday cage by hiding his personal digital assistant inside an empty foil packet of Twisties – the Australian equivalent of cheese puffs. The result was that Tom’s employer couldn’t track his location, and Tom was off to the golf course. Until some spoilsport sent his boss an anonymous letter…

Feeling festive? Which are the best Christmas markets to head for?

Slade and Wizzard on loop in every high street shop, the arrival of the John Lewis advert and the weather turning decidedly nippy – yes, Christmas has definitely taken hold at this point. If you’re looking for a way to get yourself into the festive mood whilst picking up some presents for friends and family, visiting a Christmas market can be a fantastic idea. If you’re feeling extra adventurous, you could even turn your shopping trip into a winter break. Here are our top picks of Christmas markets both within the UK and beyond.

Nottingham, UK – As well as a wealth of stalls to tempt you with festive gifts and tasty treats, Nottingham Winter Wonderland on old Market Square and Long Row has plenty more on offer for youngsters and grown-ups alike. There’s a skating rink and helter skelter for kids and ‘big kids’, as well as an ice bar offering chilled winter drinks late into the evening.

Edinburgh, UK – Edinburgh European Christmas Market takes place in the centre of the Scottish capital, making it a great choice for anyone looking for an opportunity to take a city break in the run-up to Christmas. The multitude of food and craft stalls are all within walking distance of the city’s most famous landmarks, giving you plenty to explore over a long weekend or a short break.

Strasbourg, France – One of the oldest Christmas markets in Europe having first been held in 1570, Strasbourg’s market now offers 300 stalls across ten locations. Be sure not to miss out on seeing the Great Christmas Tree in the Place Keber, which is always an impressive sight to behold.

Krakow, Poland – Krakow’s Christmas market specialises in local delicacies such as spiced nuts and boiled sweets, as well as hand-painted bauble decorations. You can also pick up some unusual antiques and bric-a-brac for good prices. Krakow offers a good likelihood of a snow-covered shopping experience too, as the city usually gets a generous dusting of the white stuff every year.

Stockholm, Sweden – Stockholm’s Christmas market takes place on the island of Djurgarden in the heart of the city, with the stalls housed within the Skansen open-air museum. There are plenty of Swedish delicacies, craft demonstrations, decoration-making workshops and dances around the Christmas tree. Skansen also hosts a zoo of Nordic animals, giving the perfect opportunity to visit a reindeer before they return the favour on your rooftop on Christmas Eve!